KANSAS CITY, Mo. — In what should be the start of the busy spring selling season, real estate experts in Missouri and Kansas say the number of people putting their homes on the market has sharply declined amid the COVID-19 pandemic.
According to The Kansas City Regional Association of Realtors (KCRAR), the number of new listings in our area dropped 30% from this time last year. That downward spiral comes at the same time unemployment rates have jumped and some lenders have tightened qualifications for borrowers.
But those changes don’t alarm real estate experts — yet. They say the impact the coronavirus will have on the housing market still isn’t known.
“We still think it will be another two to three weeks before we see the full effects of COVID-19 on the market,” KCRAR’s President Bobbi Howe told FOX4. “However, I do think we can start to see some trends now.”
One trend is the recent nosedive in new listings.
“We’ve seen new listings decrease for a couple of years,” Howe said. “So that’s not surprising.
“It’s also not surprising to see that (30 percent) decline in new listings,” she added. “Not given what’s going on with the COVID-19 and the Shelter-In-Place Orders. I don’t want to see that number taken out of context.”
To help stop the spread of coronavirus, Howe said she and her colleagues now recommend that potential buyers and sellers wait to enter the market until the Shelter-In-Place Orders are lifted.
“We only want people in the market right now who absolutely must sell their home or buy a home,” she said. “Those are people who have a job transfer, are in the military, or must buy or sell a home immediately
“The health and safety of the public is paramount,” added Howe, who said real estate agents have stopped holding Open Houses, started doing more virtual home tours, and limited the number of people involved with in-person showings. “If I were a seller, I wouldn’t want random strangers entering my home right now. ”
Listings Decline When There’s Normally An Influx of New Sellers
The Center For Real Estate at Wichita State University, which tracks MLS listings across Kansas, has also seen a drop in new listings during the coronavirus outbreak.
“We are seeing a decline and that’s just from March 15,” said Dr. Stanley Longhofer, the center’s director. “Prior to March 15, we were seeing new listing activities slightly going up. But since March 15, we’ve seen those listing go down.”
Longhofer started to chart MLS listings in Kansas on March 1 and then compared those figures to the same days in March 2019.
“We felt this crisis was moving so rapidly that we wanted to know what was happening day-by-day,” he said. “And we’re seeing a decline at a time of year when we typically start to see a lot of new homes listed for the spring selling season. It’s the time when we start to see a build-up in inventory.”
Inventory that’s already in short supply.
“When we have an inventory of homes that is above a six-month supply, that’s a flush market,” Longhofer said. “That’s a buyer’s market. If we get below a four-month supply of inventory that is a seller’s market. Inventory is tight and it’s harder for buyers to find a home with everything they want.
“At the end of March — even in the Kansas City area — there was only a 1.8 month supply of homes available for sale,” he added. “That’s down from a 2.3 month supply of homes a year ago. So, the market was incredibly tight and it looks like this crisis will make the market even tighter.”
Impact on Sellers?
Is that decline in new listings good news for sellers? Does it indicate the market will remain strong for sellers?
“In theory, it is good news for sellers,” Longhofer said. “But we’ve yet to see how this (COVID-19) impacts potential buyers. We could see some sales tail off pretty dramatically because of the current economic activity.”
The COVID-19 pandemic has rocked financial markets and triggered massive layoffs across the country. The national unemployment rate rose to 4.4 percent in March and a record 6.6 million workers filed for their first unemployment benefits the last week of that month.
Missouri’s jobless rate jumped to 4.5 percent in March. In Kansas, the jobless rate remained steady at 3.1 percent in March. But that figure, which reflects an estimated loss of 5,900 jobs from February, came out before Governor Laura Kelly issued the statewide Stay At Home Order.
“There’s no way you can have these layoffs and unemployment rates and not have a substantial impact on the housing market,” Longhofer said. “The question is how long will that last.
“For sellers, I don’t think we know yet what will happen,” he added. “The good news is those who list their homes now won’t have a lot of competition on the market.”
Sale Prices Increase
The sale price of homes in the metro also continues to rise. According to KCRAR, the average sale price for homes in our area jumped seven percent — from $245,951 to $263, 781– from this time last year.
“Sellers are still getting more for their houses than they did this time last year,” Howe said.
And homes in good neighborhoods that are priced right have — until just a few weeks ago — sold quickly.
“If you have a home that is moderately priced — $200,000 to $400,000 — that’s the bread and butter of the market and is certainly where most buyers are actively looking in these tight markets,” Longhofer said. “If they’re priced right and are in move-in condition, those homes are selling really, really fast. Or they were until all the COVID-19 hit.”
There’s even more good news for sellers in Topeka.
“With the spring home-buying season ready to jump into full swing, the entire housing market seemed to pivot in response to COVID-19 in March,” Realtor.com wrote on its website. “While in-person behaviors may have affected buyers’ willingness to visit homes in person, the hottest housing markets were still garnering listing views and closing sales throughout March.”
New Challenges For Home Buyers
For buyers, the news is more mixed.
Interest rates are at historic lows. In Kansas City, the current rate for a 30-year fixed loan is 3.12 %. Rates drop to 2.875% for a 15-year-fixed mortgage.
But buyers who’ve lost their jobs or been furloughed amid the COVID-19 pandemic may have trouble securing a home loan, Longhofer said. “The challenge for buyers will be getting qualified for a loan. If you’ve been laid off, it’s going to be harder to get approved.”
JP Morgan Chase, the largest bank in the country, recently announced most borrowers must now have a credit score of 700 and a 20 percent down payment to qualify for a home loan.
“That brings up a big point I emphasize all the time, but now it’s more important than ever,” Longhofer said. “During a real estate transaction, it’s important to use a local lender, a local title company, and other local service providers. There’s a huge benefit to that.
“A local lender understands the local economy and the local job market,” he added. “You’re not just a number on a loan file to a local lender. You’ve got someone you can talk to face-to-face.”
New Home Construction Remains Strong
What about new home construction? Has the COVID-19 pandemic impacted those sales?
The Home Builders Association of Greater Kansas City (HCHBA) said the industry was “disrupted” in March, but remains strong.
“The number of permits pulled in March 2020 was 438, which is only a slight decrease from 475 pulled in February 2020,” Kari English, communications director for HCHBA, told FOX4. “This data suggests that our industry remains strong and busy.”
She added: “Given the stay-at-home orders, it stands to reason that there would be fewer people walking through new homes. However, web traffic on member websites as well as our KC Parade of Homes mobile app indicate that there is still a motivated, capable pool of consumers active in the market.”
Two factors continue to fuel new home construction, English said. “The historically low interest rate environment coupled with a low inventory of homes for sale has contributed to the need for building to continue in order to meet demand.”
Asked if COVID-19 has caused many job losses in the local home building and remodeling industry, English said: “There was a high number of job vacancies in the residential construction sector prior to Covid-19. According to March data from the National Association of Home Builders, neither Kansas nor Missouri have seen the significant job losses due to COVID-19 that other parts of the country may have.”
Optimistic Predictions for Future
Although COVID-19 has rattled the real estate market, Howe is optimistic it will recover — and become more balanced — once the Shelter in Place Orders are lifted and the economy starts to rebound.
“I think we will see more sellers come on the market – those who decided to wait until this (pandemic) was over,” she said. “And, as more sellers enter the market, we might see some buyers exit the market. We might see some buyers get out of the market who could have been pushing their limit to buy more home than they should. Some buyers may also change their price points.
“But all that will bring a more balanced market,” Howe added. “And that is good for everyone.”
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